ITO 2(1)(2), MUMBAI V. CAROLL REALITY AND FINANACE P.LTD, MUMBAI

ITA 1872/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79473 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 14-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2010
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset
• Section: 50C; 154

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./ ITA NO.1872/M/2010 (AY: 2006 - 2007) ITO 2(1)(2), AAYAKAR BHAVAN, R.NO.543, 5 TH FLOOR, M.K. ROAD, MUMBAI - 400020. VS M/S. CAROLL REALITY AND FINANCE P LTD, SAHARA INDIA POINT CTS 40 - 44, S.V. ROAD, GOREGAON (W), MUMBAI - 400014. ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI VIJAY MEHTA / REVENUE BY : SHRI MANJUNATHA SWAMY / DATE OF HEARING :14.7.2014 / DATE OF PRONOUNCEMENT : 18 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 10.3.2010 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 10.12.2009 FOR THE ASSESSMENT YEAR, 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1 . ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION OF RS. 1.05 CRS U/S 69B OF THE ACT, OVERLOOKING THE FACT THAT THE GENUINENESS OF THE TRANSACTION HAD NOT BEEN ESTABLISHED BY THE ASSESSEE. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ER RE D IN DELETING THE ADDITION OF RS. 1.05 CRS U/S 45(3) OF THE ACT, WHICH REPRESENT THE DIFFERENCE BETWEEN THE MARKET VALUE OF THE INVESTMENT AND THE COST CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE, IGNORING THE FACT THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER WAS REALISTIC AND REASONABLE AND IN CONFORMITY WITH LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN FOR DELETING THE ADDITION OF RS. 50 LAKHS U/S 69B OF THE IT ACT OVERLOOKING THE FACT THAT ACCORDING TO THE ITS INFORMATION AVAILABLE WITH THE DEPARTMENT, THE ASSESSEE HAD PAID CONSIDERATION OF RS. 50 LAKHS IN CASH FOR THE LAND PURCHASED AT TRICHY AND IGNORING THE FACT THAT NO EXPLANATION WHATSOEVER WAS FURNISHED THE SOURCE OF INVESTMENT. 2 3. DURING THE PR OCEEDINGS BEFORE US, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE MENTIONED GROUNDS AND MENTIONED THAT GROUND NO S .1 & 3 RELATES TO THE ADDITION S OF RS. 51,72,22,070/ - AND RS. 50,00,000/ - RESPECTIVELY ON ACCOUNT OF UNDISCLOSED INVESTMENTS U/S 69B AND GROUND NO.2 RELATES TO THE ADDITION OF RS. 51,72,22,070/ - U/S 45(3) OF THE ACT. FURTHER , LD COUNSEL FILED A COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. BLADE ESTATE & FINANCE P. LTD AND MENTIONED THAT THE GROU NDS RAISED BY THE REVENUE ARE EXACTLY IDENTICAL TO THAT OF THE APPEAL ADJUDICATED BY THE TRIBUNAL IN THE SAID CASE OF ITO VS. M/S. BLADE ESTATE & FINANCE P. LTD (SUPRA) VIDE ITA NO.1981/M/2010, DATED 13.5.2014. IN THIS REGARD, L D COUNSEL READ OUT THE GROUNDS RAISED IN THE SAID APPEAL (SUPRA) AS WELL AS THE RELEVANT PARAS 5 TO 7 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 13.5.2014, WHEREIN THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE , TO DEMONSTRATE THE SIMILARITY OF THE GROUNDS AND THE FACTS . 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBUNAL IN THE CASE OF M/S. BLADE ESTATE & FINANCE P LTD (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL DATED 13.5.3014, WE FIND THAT THE FACTS ARE IDENTICAL AND PARAS 5 TO 7 OF THE ORDER OF THE TRIBUNAL (SUPRA) ARE RELEVANT IN THIS REGARD, WHICH READ AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AN D PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE SAID ORDERS OF THE TRIBUNAL, ALL THE THREE GROUNDS RAISED BY THE BEFORE THE TRIBUNAL IN THE CASE OF M/S. BHOOSHANA DEVELOPMENT P. LTD (S UPRA) WERE DECIDED IN FAVOUR OF THE ASSESSEE BY RELYING ON THE DECISION OF THE ITAT IN THE CASE OF M/S. CHIRRAYU ESTATE & DEV. PVT LTD (SUPRA). RELEVANT PARAS 2 AND 3 OF THE SAID ORDER OF THE TRIBUNAL DATED 22.5.2013 READ AS UNDER: 2. AT THE TIME OF HEAR ING LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE PLACED BEFORE US A COPY OF THE ORDER OF THE ITAT C BENCH, MUMBAI IN THE CASE OF M/S. CHIRAAYU ESTATE & DEV. PVT LTD (ITA NO.263/MUM/2010 DATED 24.8.2011) TO CONTEND THAT THE ISSUES INVOLVED IN THE A PPEAL ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. LEARNED DEPARTMENTAL REPRESENTATIVE ADMITTED THAT THE ISSUES BEFORE US ARE FULLY COVERED BY THE AFORESAID DECISION AND HENCE THE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMI SSED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECODE. THE ASSESSING OFFICER PASSED A DETAILED ORDER RUNNING INTO 37 PAGES WHICH 3 WAS LATER ON RECTIFIED U/S 154 OF THE ACT WHEREBY, THE INCOME DETERMINED WORKS OUT TO RS. 1.73 CRS AND, IN TURN, THE FOLLOWING ADDITIONS WERE THE SUBJECT MATTER OF DISPUTE BEFORE US. U/S 69B - RS. 61,56,150/ - U/S 45(3) - RS. 61,56,150/ - AND U/S 69B RS. 50,00,000/ - SINCE, LEARNED DEPARTMENTAL REPRESENTATIVE ADMITTED THAT THE ISSUES STAND SQUARELY COVERED BY THE DECISION OF ITAT C BENCH, MUMBAI, IT IS NOT NECESSARY TO GO INTO FURTHER DETAILS. SUFFICE TO SAY THAT IN THE LIGHT OF THE DECISION OF THE ITAT (SUPRA), T HE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMISSED AND ACCORDINGLY THE ORDER OF THE CIT (A) IS UPHELD. 6. FURTHER, ON PERUSAL OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. BHAVANEE ESTATE AND REALITY P. LTD (SUPRA), WE FIND PARAS 5 AND 6 ARE RELEV ANT IN THIS REGARD. THEREFORE FOR THE SAKE OF COMPLETENESS OF THIS ORDER THE SAID PRARS 5 AND 6 OF THE TRIBUNALS ORDER DATED 25.7.2013 ARE REPRODUCED HERE UNDER: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL AS WELL AS THE ORDERS OF THE ITAT PLACED BEFORE US. WE HAVE PERUSED THE CITED ORDERS OF THE ITAT IN THE CASE OF M/S. CHIRAAYU ESTATE & DEV. PVT. LTD. (SUPRA) AND FIND PARA 11 TO 15 ARE RELEVA NT HERE AND THE SAME ARE REPRODUCED AS FOLLOWS. 11. WE AGREE WITH THE ABOVE FINDINGS AS THERE IS NOTHING ON RECORD TO INDICATE THAT ASSESSEE HAS INVESTED MORE THAN WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT. IN FACT THE ASSESSING OFFICERS APPROACH IN MAKI NG THE ADDITION ORIGINALLY AT RS. 60,57,27,667/ - IS ALSO NOT CORRECT AND RECTIFIED BY THE ORDER U/S 154 SUBSEQUENTLY. THERE SEEMS TO BE CASUAL AND PEDANTIC APPROACH IN EXAMINING THE ISSUE AND MAKING THE ADDITION BY THE A.O. 12. THE LEARNED COUNSEL RELIED ON THE JUDICIAL PRINCIPLES ESTABLISHED IN THE CASE OF DILSHAD TRADING CO. (P) LTD. VS. ITO 49 LTD 348 (BOM), CIT VS. LALIT BHASIN 290 ITR 245 (DEL) AND THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. K.K. ENTERPRISES 178 TAXMAN 187. ALL THE ABOVE JUDGMENTS ARE IN SUPPORT OF THE ASSESSEE, WHERE IT WAS HELD THAT FOR INVOKING THE PROVISIONS OF SECTION 69B THERE SHOULD BE JUSTIFIABLE EVIDENCES FOR MAKING THE ADDITION. IN THE ABSENCE OF ANY MATERIAL ON THE BASIS OF WHICH ADDITION UNDER SE CTION 69B CAN BE MADE THAT ADDITION CAN ONLY BE CONSIDERED AS PRIMARILY ON IMAGINATIVE BASIS AND CONJUNCTURES RATHER THAN ON THE BASIS OF ANY RECORD OR EVIDENCE. THERE IS NO BASIS FOR CONSIDERING THAT ASSESSEE HAS MADE ANY UNEXPLAINED INVESTMENT SO AS TO I NVOKE PROVISIONS OF SECTION 69B. A.O. CANNOT PRESUME THE DIFFERENCE BETWEEN THE PURCHASE PRICE ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNT AS UNACCOUNTED INVESTMENTS IN THIS CASE. AS RIGHTLY POINTED OUT BY THE CIT(A) EVEN A REFERENCE TO VALUATION D OES NOT BRING INTO EXISTENCE THE SCOPE FOR MAKING THE ADDITION AS PROVISIONS OF SECTION 50C WERE ALSO ON STATUTE AND THERE IS NO DIFFERENCE BETWEEN THE VALUE AS REGISTERED AND THE VALUE AS MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. IN VIEW OF THIS, THER E IS NO MERIT IN REVENUES GROUND IN CONTESTING THE ORDER OF THE CIT(A), WHO DELETED THE ADDITION NOT ONLY ON THE BASIS OF THE FACTS BUT ALSO ON PRINCIPLES OF LAW. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) AND REJECT THE GROUND. 4 13. WITH REFERENCE TO SECOND GROUND, I.E. ADDITION MADE UNDER SECTION 45(3), PROVISIONS OF SECTION 45(3) ARE AS UNDER: - 45. (1) (2) (3) THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY A PERSON TO A FIRM OR OTHER ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A CO - OPERATIVE SOCIETY) IN WHICH HE IS OR BECOMES A PARTNER OR MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE, SHALL BE CHARGEABLE TO TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TAKES PLACE AND, FOR THE PURPOSES OF SECTION 48, THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF THE CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. 14. A PLAIN READING OF THE SAID PROVISION WOULD REVEAL THAT THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET TO ANOTHER ENTITY BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE SHALL BE CHARGEABLE TO TAX. THE PROFIT OR GAI N WOULD ARISE ONLY WHEN THE TRANSFER HAS BEEN MADE AT A PRICE WHICH IS MORE THAN THE COST PRICE AND THE DIFFERENCE BETWEEN THE COST PRICE AND AMOUNT AT WHICH TRANSFER HAS TAKEN PLACE CAN BE CHARGED UNDER SECTION 45(3). IN THE INSTANT CASE THE PURCHASE PRIC E OF LAND AS RECORDED IN THE TRANSFERORS BOOK AND RECORDED IN THE BOOKS OF THE JOINT VENTURE ARE THE SAME. AS PER PROVISIONS OF SECTION 45(3) PRICE OF LAND RECORDED IN THE BOOKS OF JOINT VENTURE IS REQUIRED TO BE CONSIDERED AS RECEIPT OF FULL VALUE OF CON SIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF CAPITAL ASSETS. ONCE THE PRICE RECORDED IN THE JOINT VENTURES BOOKS IS TREATED AS FULL VALUE OF CONSIDERATION, THE PROVISIONS DO NOT PERMIT SUBSTITUTION OF ANY VALUE SO AS TO MAKE ADDITION UNDER SE CTION 45(3). IN FACT THE APPROACH OF THE A.O. IS ALSO NOT CORRECT IN THE SENSE THAT UNDER SECTION 45(3) ONCE THE FULL VALUE OF CONSIDERATION IS TAKEN AS THE AMOUNT RECORDED IN THE BOOKS OF THE JOINT VENTURE, THE CAPITAL GAIN CAN BE WORKED OUT BY REDUCING T HE COST OF PURCHASE AS PER THE BOOKS OF ASSESSEE. IN CASE THE A.O. SUBSTITUTES THE COST OF PURCHASE, BY WHATEVER MEANS, THEN THAT COST PRICE HAS TO BE ADJUSTED IN THE CAPITAL GAINS. THIS MAY RESULT IN A LOSS OF EQUAL AMOUNT AS THE BOOKS OF JOINT VENTURE SH OW THE BOOK VALUE AS CONSIDERATION AND SUBSTITUTED COST PRICE (VALUE DETERMINED BY AO IN THE ORDER) AS A DEDUCTION. THIS WORKING WOULD RESULT IN A LOSS BUT NOT A GAIN. THIS SIMPLE ARITHMETIC CALCULATION WAS MISSED BY THE A.O. AND HE MADE THE ADDITION UNDER SECTION 45(3) WHICH DOES NOT PERMIT HIM TO SUBSTITUTE THE FULL VALUE OF CONSIDERATION OTHER THAN THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE JOINT VENTURE. AS THE ASSESSING OFFICERS ACTION IS NOT ACCORDING TO THE PROVISIONS OF SEC 45(3), THERE IS NO JUSTIFICATION FOR UPHOLDING THE CONTENTIONS OF REVENUE. WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF APPEAL. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 6. FURTHER, WE HAVE ALSO PERUSED THE ORDER OF THE ITAT, B BENCH, MUMBAI IN THE CASE OF M/S. BHOOSHANA DEVELOPMENT P. LTD. (SUPRA). WHILE DECIDING THIS CASE, WHEREIN THE IDENTICAL ISSUES ARE ISSUES INVOLVED, THE ITAT HAS FOLLOWED THE VIEW TAKEN BY THE COORDINATE BENCH IN THE CASE OF M/S. CHIRAAYU ESTATE & DEV. P. LTD. (SUPRA). CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUES INVOLVED AND THE ADMITTED POSITION OF THE LD DR THAT THE ISSUES STAND SQUARELY COVERED BY THE DECISION OF THE ITAT, WE ARE OF THE OPINION THAT THERE IS NO NEED TO GO INTO FURTHER DETAILS AND THE GROUNDS RAISED BY THE REVENUE DESERVES TO BE DISMISSED. ACCORDINGLY, THE ORDER OF THE CIT (A) IS UPHELD AND GROUNDS OF THE REVENUE ARE DISMISSED. 5 7. CONSIDERING THE SETTLED POSITION OF THE ISSUES, THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL DO NOT SURVIVE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 6. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE ISSUES RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE APPEAL DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 13.5.2014 (SUPRA), WHEREIN ONE OF US (AM) IS THE PARTY TO THAT ORDER, AND THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AS WELL AS FOLLOWING THE PRINCIPLE OF CO NSISTENCY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED I N THE OPEN COURT ON 18 TH JULY, 2014. S D/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 18 /07/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI